Britain agrees sale of 40% Eurostar stake to British and Canadian funds

Britain agreed to sell its 40 per cent stake in the Eurostar rail link for £585 million to a consortium of Canadian public pension fund Caisse de Depot du Placement du Quebec and British asset manager Hermes.

The government announced the deal for its stake in the high-speed rail link between Britain and continental Europe on Wednesday following a competitive sale process begun in October by finance minister George Osborne.

Osborne said the price tag exceeded expectations. According to 2013/14 government accounts, the share capital value of the stake was £325 million. Investment bank UBS advised the government on the sale.

The deal is part of a trend for institutional investors such as pension funds and insurers, squeezed by low interest rates globally, to buy into infrastructure projects.

Such investments are high-yielding and match the long-term liabilities in pension and savings plans, but a lack of attractive opportunities has pushed up prices.

"It remains something that we are cautious about," Macky Tall, Caisse senior vice president for private equity and infrastructure, said in Montreal.

Mr Tall said Caisse and Hermes worked on the Eurostar deal for months, “and we are sure that we have valuated it properly”.

The finance ministry said it expected to complete the sale by the second quarter.

The consortium, Patina Rail, will result in Caisse, which has an infrastructure investment portfolio valued at more than 10 billion Canadian dollars, owning a 30 per cent stake in Eurostar. Hermes Infrastructure, part of British-based fund Hermes Investment Management, will own 10 per cent.

The sale is part of a national plan to raise £20 billion by selling off publicly owned assets to pay down Britain’s national debt and help rebalance the country’s books.

The deal will generate an additional £172 million for the UK treasury upon completion because Eurostar has agreed to redeem the government’s preference shares.

The rest of Eurostar is held by French rail operator SNCF, which has a 55 per cent stake, and Belgian national rail operator SNCB, which has 5 per cent.

The deal requires regulatory approval and existing shareholders’ agreeing not to exercise their option to acquire the British stake at a 15 per cent premium, the treasury said. – Reuters